Bond Selloff Deepens, Stocks Fall as Oil Gains: Markets Wrap
(Bloomberg) — A selloff in global bonds extended as the deadlock over the Iran war drove oil prices higher, fueling inflation concerns and raising bets that central banks will need to keep tightening policy.
Treasuries declined across the curve with the 30-year yield rising to the highest in almost three years on investor fears over accelerating inflation. Japan’s 10-year yields jumped 10 basis points to levels last seen in 1996, while the nation’s 30-year yield surged 20 basis points to the highest since its 1999 debut. Bonds also dropped in Australia and New Zealand.
As bond yields surged, stocks extended their slide from record highs. Asian shares fell 0.7%, although South Korea’s Kospi — the world’s best-performing benchmark this year — erased earlier losses to rise 1.1% as Samsung Electronics Co. rebounded. Equity-index futures indicated more losses for Europe and the US.
The dollar, the haven of choice during the Middle East conflict, rose for a sixth day. Gold and silver, non-yielding assets, fell. Weighing on sentiment, Brent crude rose about 2% to over $111 a barrel, after adding almost 8% last week, with no progress in efforts to reopen the vital Strait of Hormuz. President Donald Trump also said the “clock is ticking” for Iran to strike a deal.
Monday’s market tumult followed a selloff in stocks and bonds Friday as fears grow that the effective closure of the Strait of Hormuz will keep oil prices elevated, fuel inflation and convince central banks to keep interest rates higher. A key test for investors this week will be Nvidia Corp.’s earnings, after months of equities brushing aside mounting macro risks on bets that billions of dollars spent on the AI rollout would drive corporate earnings growth.
“We are definitely in the midst of a mini rate shock,” said Kyle Rodda, a senior analyst at Capital.com in Melbourne. “The upside risk to rates is going to bring a bit of uncertainty to the markets, but that sort of volatility tends to be quite two-way,” he said, adding that equities could still see bouts of short-term relief.
Attention is firmly on the bond market, with a shift in wagers around the Federal Reserve. Traders now see a rate hike as a lock by March, underscoring how the Iran war has flipped the bond-market narrative on its head since late February, when two quarter-point cuts were expected for 2026.
The Fed needs to catch up with bond markets or risk losing control of borrowing costs as investors grow increasingly worried about inflation, according to Yardeni Research.
“If the Fed fails to remove it, investors will conclude that the central bank is falling behind the inflation curve and will demand a higher inflation risk premium,” Ed Yardeni, president and chief investment strategist, wrote in a note. “We expect the Fed to hold rates unchanged at the June meeting and shift to a tightening policy stance.”
Core Concerns
The core issue centered around the lack of progress in the Middle East, with the US and Iran not able to make progress on their fragile ceasefire deal.
Washington offered “no tangible concessions,” while seeking “to obtain concessions that it failed to obtain during the war, which will lead to an impasse in the negotiations,” said Iran’s semi-official Mehr news agency.
Meantime, a drone attack sparked a fire at a United Arab Emirates nuclear plant, highlighting the risks to the fragile ceasefire.
Finance ministers of the Group-of-Seven are set to discuss the debt selloff when they meet this week, though how they can ease pressure remains to be seen. The main issue remains the transit of oil through the Strait of Hormuz, a vital artery for the flow of oil and gas from the Middle East.
Elsewhere, grain futures in Chicago jumped on Monday after the White House outlined an additional commitment by China to buy US farm goods, stoking hopes that crop exports beyond soybeans could pick up.
Shares in Shanghai held steady after China’s growth slowed across the board in April with investment resuming declines while retail sales and industrial output fell short of forecasts.
The pound weakened after Wes Streeting said he would take part in any leadership contest to replace Keir Starmer and called for Britain to rejoin the European Union. The declaration follows Manchester Mayor Andy Burnham who announced he intends to run for parliament, opening a pathway to also challenge Starmer, which caused a rout in gilts last week in fears of possible expansionary fiscal policy.
Amid the rising inflation and the continued stalemate in Iran, one key issue for traders this week will be the Nvidia Corp. earnings. The AI bellwether will announce its results after more than 80% of the S&P 500 companies reported earnings that beat estimates, according to Bloomberg Data.
“Rising inflation data across major economies have been the main reason why equities have been crawling back a bit, while long yields are in general up,” said Anna Wu, a cross-asset strategist at Van Eck. Any weakness in Nvidia’s earnings “could weigh on tech names and broader market.”
Corporate News:
Kioxia Holdings Corp.’s shares were untraded in a glut of buy orders Monday morning after the supplier of storage for AI data centers reported soaring profit and gave an outlook that trounced expectations. Samsung Electronics Co. and its largest labor union are set to resume negotiations Monday to avert a strike that the nation’s prime minister warned could wreak havoc on the economy. NTT Finance has postponed a planned yen-denominated corporate bond sale until early June or later amid a surge in Japanese government bond yields. Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.6% as of 11:40 a.m. Tokyo time Japan’s Topix fell 0.8% Australia’s S&P/ASX 200 fell 1.3% Hong Kong’s Hang Seng fell 1.3% The Shanghai Composite rose 0.1% Euro Stoxx 50 futures fell 1% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1617 The Japanese yen fell 0.1% to 158.90 per dollar The offshore yuan was little changed at 6.8177 per dollar Cryptocurrencies
Bitcoin fell 1.8% to $76,818.63 Ether fell 3.4% to $2,114.37 Bonds
The yield on 10-year Treasuries advanced three basis points to 4.63% Japan’s 10-year yield advanced nine basis points to 2.790% Australia’s 10-year yield advanced six basis points to 5.13% Commodities
West Texas Intermediate crude rose 2.1% to $107.67 a barrel Spot gold was little changed This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess, Mia Glass, Ruth Carson and Winnie Hsu.
©2026 Bloomberg L.P.
